A Thoughtful Insight into Seeking a Stay of Proceedings
July 19, 2019
“Should I stay or should I go”, queried the Clash. Litigators are often faced with the same question, albeit in a far different context. Most (but certainly not all!) Commercial Division practitioners try to move litigation with some degree of alacrity. The quicker the litigation proceeds, the swifter the resolution. Clients like quick resolutions. Therefore, it is not often that practitioners want to slow, or completely stop, a litigation. However, sometimes having a client that is sued in two different courts relating to the same subject matter may require a closer look at whether a stay of proceedings is appropriate or desirable.
CPLR 2201 states, “[e]xcept where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just.”
In a recent decision, Matter of PPDAI Group Sec. Litig. (2019 NY Slip Op 51075(U)), defendants moved to request an order staying discovery in the Commercial Division, state court action until the resolution of a pending motion to dismiss in the United States District Court in the Eastern District of New York (“EDNY”). The EDNY action made virtually the same allegations contained in the earlier-filed state court action.
New York County Commercial Division Judge Scarpulla reminded practitioners that the determination as to whether to grant a stay of proceedings pursuant to CPLR 2201 resides in the sole discretion of the Court. However courts consider six factors to help make such a determination (see Asher v. Abbott Laboratories, 307 AD2d 211, 211-212 [1st Dept. 2003]).
The first factor that courts consider is which forum will offer a more complete disposition of the issues presented in both actions. Whether the claims asserted in both actions are identical or whether any claims are time-barred in one court due to a later filing date strongly dictate which court will be able to offer “a more complete disposition”.
The second factor to consider is which forum has greater expertise in the type of matter. As noted in Judge Scarpula’s decision, “the Commercial Division is a long-standing, specialized business court which deals exclusively with complex commercial litigation.” It is therefore unlikely that any court will determine that the New York State Commercial Division courts are not equipped to handle a particular matter. Consideration should also be made that federal courts have general dockets of both criminal and civil actions which may limit their exposure to more business-related litigation.
The third factor is which action was commenced first and the stage of litigation of each . Although not dispositive on a motion to stay, Judge Scarpula noted that “the general rule in New York is that the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of the rules of comity to interfere.”
The fourth factor that courts consider is whether there is substantial overlap of the issues asserted in both actions. This often times encompasses an analysis into the parties of both actions as well. Having “a majority” but not all of the parties overlapping in the actions may not be good enough to obtain a stay of proceedings.
The fifth factor to consider is whether a stay will avert duplication of effort and waste of judicial resources. Judge Scarupla commented that “[t]he possibility that at some point there might be two trials is not an appropriate basis for granting a stay.”
Finally, courts consider whether either party has demonstrated that they would be prejudiced by a stay.
New York Commercial Division practitioners should keep these factors in mind the next time they are faced with the possibility of making (or opposing) a motion to stay proceedings in order to have a better chance of predicting the outcome of the motion.